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Offshoring in a Knowledge Economy

  • Pol Antràs
  • Luis Garicano
  • Esteban Rossi-Hansberg

How does the formation of cross-country teams affect the organization of work and the structure of wages? To study this question we propose a theory of the assignment of heterogeneous agents into hierarchical teams, where less skilled agents specialize in production and more skilled agents specialize in problem solving. We first analyze the properties of the competitive equilibrium of the model in a closed economy, and show that the model has a unique and efficient solution. We then study the equilibrium of a two-country model (North and South), where countries differ in their distributions of ability, and in which agents in different countries can join together in teams. We refer to this type of integration as globalization. Globalization leads to better matches for all southern workers but only for the best northern workers. As a result, we show that globalization increases wage inequality in the South but not necessarily in the North. We also study how globalization affects the size distribution of firms and the patterns of consumption and trade in the global economy.

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File URL: http://www.nber.org/papers/w11094.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11094.

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Date of creation: Jan 2005
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Publication status: published as Pol Antràs & Luis Garicano & Esteban Rossi-Hansberg, 2006. "Offshoring in a Knowledge Economy," The Quarterly Journal of Economics, MIT Press, vol. 121(1), pages 31-77, 02.
Handle: RePEc:nbr:nberwo:11094
Note: ITI LS
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  1. Andrew B. Bernard & Raymond Robertson & Peter K. Schott, 2004. "Is Mexico A Lumpy Country?," NBER Working Papers 10898, National Bureau of Economic Research, Inc.
  2. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004. "Export Versus FDI with Heterogeneous Firms," American Economic Review, American Economic Association, vol. 94(1), pages 300-316, March.
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  5. Rossi-Hansberg, Esteban & Garicano, Luis & Antras, Pol, 2006. "Offshoring in a Knowledge Economy," Scholarly Articles 3196323, Harvard University Department of Economics.
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  14. Antras, Pol, 2003. "Firms, Contracts, and Trade Structure," Scholarly Articles 3196328, Harvard University Department of Economics.
  15. Brian Aitken & Ann Harrison & Robert E. Lipsey, 1995. "Wages and Foreign Ownership: A Comparative Study of Mexico, Venezuela and the United States," NBER Working Papers 5102, National Bureau of Economic Research, Inc.
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  19. Luis Garicano & Esteban Rossi-Hansberg, 2004. "Inequality and the Organization of Knowledge," American Economic Review, American Economic Association, vol. 94(2), pages 197-202, May.
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  29. repec:hrv:faseco:4784029 is not listed on IDEAS
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